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<br />Office of the State Auditor <br />City Expenditures and the Public Purpose Doctrine <br />Page 7 <br /> <br />F. Employee Compensation and Recognition Events <br /> <br />1. B onnses. Public entities cannot pay year-end bonuses to employees for <br />performance of past services. See Ops. Att'y Gen. 107-a-3 (Jan. 22, 1980) and <br />270-D (Aug. 12, 1977) (prohibiting retroactive pay increases or bonuses to <br />public employees). <br /> <br />Comment: There are several exceptions to this rule in collective bargaining settings. <br /> <br />2. In-kind Benefits. In-kind benefits need specific statutory authority in order to <br /> <br />be provided to public employees. See Ops. Att'y Gen 359b (Oct. 24, 1989) <br />and 161b-12 (Jan. 24,1989). <br /> <br />Comment: Bonus or incentive programs need to be set up in advance, based upon <br />objective criteria. <br /> <br />3. Employee Appreciation Dinners and Awards. The Attorney General's Office <br />is unaware of any authority for the expenditure of public funds for annual <br />employee appreciation dinners. See Letter of February 6, 1998 from Attorney <br />General's Office to Champlin City Attorney regarding employee recognition <br />program. Addressing whether a city, pursuant to its employment policy which <br />was understood to be part of its employment agreement, can hold an annual <br />employee appreciation dinner at public expense for all employees, or award <br />recognition gifts for those employees with 25+ years of service, the Attorney <br />General's Office concluded: "Thus, while an agreed upon monetary bonus might <br />be provided as part of a salary plan to employees who meet performance or <br />longevity standards, we are at a loss to locate authority for expenditures of funds <br />for in kind awards or social occasions of the type described." !d. The Attorney <br />General's Office also questioned a city's authority to expend any public funds for <br />award recognition gifts for employees based on years of service. Id. <br /> <br />Comment: Counties are expressly authorized to establish and expend funds for <br />preventive health and employee recognition services. Minn. Stat. ~ 15.46 (2002). Cities <br />may wish to seek similar legislative authorization to clarify this matter. <br /> <br />Prior to the February 6, 1998 Attorney General's Office letter, employee recognition <br />awards and events would not result in an audit comment if: <br />